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Northern Nevada Economic Metrics

From Stat Pack co-publisher RCG Economics, here’s the latest on the economy in the northern region of the state. If you have any questions, email RCG Principal John Restrepo at jrestrepo@rcg1.com. Sign up to receive our Friday Fact Pack (which receives rave reviews from our readers for its winning combination of great information and humor) over there to the right. —–>

The RCG Employment Index12-month moving average (“12MMA”) for Reno-Sparks rose to 98.6 in April, and is up 1.1 points from the 97.5 recorded in April 2016. The Index is now only 1.2 points below the peak. We expect the general upward trend will continue, maintaining the trajectory that started in 2011. The index peaked 11 years ago in December 2005 at 99.8, essentially 100. The trough of 89.6 occurred in January 2010.

Reno-Sparks job growth on a 12MMA in April 2017 again fell 0.1 points and is now 4.3%. The rate of growth is equal to the rate recorded in April 2016. The lowest rate of growth in the last 10 years occurred in December 2009 (-9.3%). The region has surpassed its previous high mark of 3.7% achieved in December 2006.

The 12MMA of the headline unemployment rate fell by 0.1 points for the 5th month straight to 4.6% in April 2017. When compared to the April 2016 headline unemployment rate of 5.9%, this April’s rate was more than 1 percentage-point lower. The unemployment rate continues to improve steadily and is approaching rates seen before the Great Recession.

The U-3 and U-6 unemployment rates for Nevada were both down in the 1st quarter of 2017 by 0.3 points. The U-6 rate fell from 12.2 % in Q4 to 11.9% in Q1. The U-3, or headline rate, also fell from 5.9% to 5.6%. Nevada still has the third highest U-6 rate in the nation, beating only New Mexico and Alaska.

In terms of the U-3 rate, Nevada is not doing much better, but is out of the bottom five. It is now tied with Illinois for the 6th highest U-3 rate in the nation.

Of 78,458 construction jobs recorded for April in Nevada, 14,592 were in the Reno-Sparks MSA (12MMA). This is 7.2% more than the 13,617 jobs recorded the previous year in April 2016, and 61% of the peak (see below). The region’s commercial and residential markets are very strong, because of the strong economy. The latest stats show that 6.5% of the region’s job-base was in construction. Construction jobs in the Reno-Sparks MSA peaked at 24,042 in August 2006 on a 12MMA basis. At that time, the industry accounted for 11.1% of all jobs. The construction sector continues to recover since bottoming out in February 2012 when there were only 8,792 construction jobs.

YOY growth in visitation to Washoe County continues to outpace growth in Clark County. In April 2017, the 12MMA visitor total for Washoe was 412,022, 2.8% higher than in April, 2016. For comparison, visitation to Las Vegas is up only 0.4% in April on a YOY basis. Reno had been lagging behind Las Vegas in visitor growth, but the tables have turned with YOY visitor growth rates in Washoe County beating those of Clark County every month since June 2016.

Washoe County has now seen YOY growth in visitor volume every month for over 2 straight years, since January 2015, at an average rate of 2.4%. The 12MMA peak occurred in May 2004, when 467,904 visitors came to Washoe. The highest annual growth rate occurred in January 2013, when visitor volume grew 5.8%. Though there has been some improvement, the Reno-Sparks hospitality industry continues to face challenges.

Washoe County’s 12MMA YOY gross gaming revenue grew by 1.9% in April, bringing total revenue up to $67 million, or 75% of the peak (see below). The growth rate has been positive for more than 2 ½ years straight at an average rate of 3.0%. However, this month’s YOY growth was the lowest seen since the 2nd month of this streak; we are now in the 28th month.

Gaming revenues peaked in June 2006 at $89.4 million. On an annual growth rate basis, growth peaked at 5.5% in June 2006.

Taxable retail sales in Washoe County have been achieving new highs month after month, reaching $661.2 million in March 2017. This was an 8.7% jump compared to March 2016 on a 12MMA basis. This represents over 5 years of rising retail sales on a YOY basis. Sales have surpassed their previous peak on a nominal basis (not inflation-adjusted). As the chart shows, Washoe’s taxable sales growth in April was beating the state average by a 1.7 percentage-point margin.

The region’s strong economy, which is being driven by its success in business attraction and retention, is the primary driver of taxable retail sales growth.

The Q1, 2017 median sales price of $315,000 for single-family home resales in the Reno-Sparks area represents an 8.6% jump YOY and a 2.4% increase compared to Q4, 2016. The Q1 median price is now approximately $13,626 (4.5%) greater than the $301,374 that would have resulted from using the 1990-2001 average annual appreciation rate of 4% per year. Housing affordability is a looming problem that should be monitored closely by public officials and community leaders.

MLS home resales in the Reno-Sparks area increased to 536 units in April 2017 on a 12MMA basis. This is 2.1% more resales than the previous April. For more than 2 straight years now home sales have been rising on a YOY basis. After reaching record-high territory, home sales now appear to have leveled-off. The median sales price rose to $312,842 (12MMA) in April, an 8.5% jump from April 2016. For comparison, the Las Vegas median resale price in April increased by 7.4% to $209,232. The looming affordability issue also applies to the resale market.

In Q1, 2017 the Housing Opportunity Index (“HOI”) for the Reno-Sparks MSA fell 2.5 points from 52.6 in Q4 to 50.1 in Q1 on a four-quarter moving average (“4QMA”) basis. The U.S. index decreased 1.2 points from 62.1 to 60.9 during the same period. The Reno-Sparks 4QMA HOI is almost 11 points lower than the national number. On a YOY basis, the Reno-Sparks index fell 5.4 points from 55.5 in Q1, 2016.

Reno-Sparks’ HOI peaked at 85.8 in Q1, 2012. It bottomed out at 17.3 in Q4, 2006 at the peak of the housing boom. The 10-year average is 60. The fact that the region’s latest index is lower than the 10-year average tells us that the housing market remains relatively affordable, but there could be issues in the future if the index continues to deteriorate.

The HOI is based on the share of homes sold that are affordable to a family earning the median income in the Reno-Sparks MSA, assuming standard mortgage underwriting criteria.

The 12MMA of the average weekly wage (not adjusted for inflation) in the Reno-Sparks MSA was unchanged in April at $794, a welcome pause from 9 straight months of declining weekly earnings. When considered on a YOY basis it is down -3.8% from $825 in April 2016.

Additionally, the inflation-adjusted 12MMA wage of $690 is $1 less than the previous month’s real wage of $691, bringing it -5.4% lower than the $729 recorded in April 2016. In April, Reno-Sparks’ average weekly real earnings were 4.7% higher than the Las Vegas average of $659. But where Las Vegas is improving, Reno-Sparks is headed in the opposite direction. Inflation-adjusted wages have experienced a significant 5.5% drop from the recent record high in May 2016 of $730.

Weekly hours in the Reno-Sparks MSA continue on their upward trend rising again in April by 0.1 points to 35.7. When compared to April of last year, weekly hours are up 0.8 hours from 34.9. The 8-year peak occurred in October 2008 at 37.1 hours, while the trough (8-year) of 32.5 hours occurred in September 2014.

As of June 7, 2017, the average price per gallon for regular unleaded gasoline in Reno-Sparks was up $0.34 (12.2%) to $3.10 from $2.76 a year prior. Compared to the previous month, the price of regular unleaded is up $0.15 (5.1%).

According to AAA, “Low combinations of gasoline storage and production levels are generating concern in the region (West Coast). In Northern California, planned and unplanned refinery maintenance has negatively affected gasoline production. In May, imports helped the West Coast meet supply demands, but prices could continue to increase in the region until refiners resume normal operations.”

Per the World Gold Council, the end-of-month spot price of gold (ounce of pure gold) fell by -0.13% in April 2017 to $1,257, on a 12MMA basis. On a YOY basis, the price of gold increased by 8.9%. It peaked in December 2012 at $1,678. Prices have been increasing on a YOY basis for the past 9 consecutive months.